(Reuters) - Wall Street traders are preparing for the possibility of another day of closed financial markets on Tuesday after Hurricane Sandy, the monster storm menacing the Northeast, led to the first weather-related shutdown of U.S. stock markets in 27 years.
Market participants and regulators decided late on Sunday to shut the market, reversing an earlier plan to keep electronic trading going on Monday and leaving some complaining about the late decision.
Bond markets, which are closing at noon EDT (1600 GMT) on Monday, will not reopen on Tuesday, a trade group said.
“It doesn’t make sense to put people in harm’s way or to only have half a market,” said Nicholas Colas, chief market strategist at ConvergEx Group in New York. “If just the electronic market was open, that wouldn’t provide enough interest, with everything else still closed.”
The decision to close stock and options markets came after regulators, exchanges, and dealers discussed the unknowns that would have been tested if the markets opened on Monday, three sources familiar with the situation said.
After a mass transit shutdown in New York, Wall Street had still prepared to open for business with limited staffing by booking hotel rooms for key employees and leaning on offices in other cities.
The Securities Industry and Financial Markets Association, a Wall Street trade group, held a conference call around 11 p.m. on Sunday to debate whether to close, said a brokerage executive who requested anonymity because he is not allowed to speak to the media.
“It was like trying to corral cats,” the executive said. “There were a lot of questions because so many things could be affected by this.”
About 50 million people from the Mid-Atlantic to Canada were in the path of the nearly 1,000-mile-wide (1,600-km-wide) storm, which forecasters said could be the largest to hit the mainland in U.S. history. It was expected to topple trees, damage buildings, cause power outages and trigger heavy flooding.
In a statement released on Sunday, NYSE Euronext NYX.N said it was considering closing Tuesday, and traders interviewed said they thought it was a likely bet.
“I think tomorrow is supposed to be the worse day,” said Kenneth Polcari, a long-time floor trader at the NYSE. “This afternoon into tonight, how are people supposed to get into work?”
Flooding is already hitting parts of Lower Manhattan and parts of New Jersey even before the storm makes landfall.
Equity futures continued to trade through Monday morning, closing at 9:15 a.m. EDT. CME Group Inc (CME.O) said it was closing its interest-rate futures trading as of noon EDT.
The U.S. National Hurricane Center said on Monday the Category 1 storm had strengthened as it turned toward the coast and was moving at 20 miles per hour. It was expected to bring a “life-threatening storm surge,” coastal hurricane winds and heavy snow in the Appalachian Mountains, the NHC said.
”The bigger banks and financial institutions were all willing to put in some sort of staffing to say open,“ said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. ”The closer it got to midnight the less sense it made to do it, because people were willing to do less and less.
“Then we got a message that our building in Jersey City, the front doors are going to be sandbagged, so that effectively ended that.”
Reporting by Jessica Toonkel, Chuck Mikolajczak and Ryan Vlastelica; Writing by Rick Rothacker; Editing by David Gaffen and Lisa Von Ahn